Non-oil & gas to drive compressors demand in MENA

The Middle East and North Africa (MENA) features amongst the fast-growing regions in the world second to Asia Pacific. While the oil and gas industry has been the key contributor to the region's development, the local governments' unified vision towards diversification beyond the traditional limits and foray into the non-oil and gas has been paying rich dividends. Manufacturing and extended downstream activities have been continuously invested in to ensure sustenance on the growth path.

Economic growth, coupled with a growing populace, has led to substantial increase in the region's inherent energy / infrastructure requirements. The power and industrial infrastructure has witnessed a massive upgrade followed by significant investments. Barring disputes arising out of sectarian divides and political situations, the region is largely destined to establish itself as an economic superpower over the next decade.

Demand for equipment is a natural consequence of industrial growth. Rotating equipment, a critical machinery of any industrial setup, of which compressors is an essential part, continues to witness installations in the region. As per Frost & Sullivan estimates, 2013 revenues for the compressors market in MENA were more than US$1.7 million, and the same has grown at a healthy rate (more than 7%).

The market for Centrifugal Compressors during this period was estimated at more than US$1.17 million while that of Positive Displacement (PD) compressors was in excess of US$527 million. Overall, the MENA market for compressors is forecast to become a more than US$2.1 million-opportunity by 2016.

Frost & Sullivan's research on PD (includes Reciprocating and Rotary Screw Compressors) and Centrifugal Compressors market suggests that a paradigm shift is likely to take place, with the emergence of non-oil and gas segment as a primary demand driver.

Growing market and intensifying competition

Given that the predominant demand for compressors is from the oil and gas industry, most of the global manufacturers who cater to this industry are present in the MENA. Major manufacturers, specialising in customised engineering solutions and having robust product portfolios, cater to most of the high-value projects (especially, oil and gas) and those involving compressors for critical process requirements.

As is the case globally, major multi-national corporations like General Electric (GE), Siemens, Atlas Copco, Elliott Group, and Dresser-Rand also dominate the MENA market for compressors. These companies have gradually built-up extensive solution portfolios suiting local requirements, and their presence in the MENA spans across pre-sales and sales support, marketing, and comprehensive after-sales support. While there is minimal value addition (engineering) locally, supplier investments targeting manufacturing/assembly operations in the region are being explored.

Traditionally, compressor installations in the MENA were dominated by American and European vendors. However, the penetration of Asian (mainly Korean) Engineering, Procurement and Construction (EPC) contractors resulted in greater acceptance of compressors from their respective countries, intensifying competition in the MENA compressors market.

In the short term, resurgence of industries across the region is expected to create opportunities for established and new market entrants. However, given the dynamic nature of this region, compressor suppliers planning to expand or enter the MENA market might need to periodically re-examine their strategies in accordance with changing regional dynamics in order to maintain a competitive edge. The ability to deliver differentiated services drives solution providers' competitiveness and can be a key decisive factor.